what is Economics?


1. The fundamental problem of economics is
A. The establishment of a political framework to determine the what, how and for
whom of production
B. To establish an equitable distribution of income
C. The scarcity of productive resources relative to society’s unlimited wants
D. Finding striking determinants between the forces of supply and demand.

2. Economic problem occurs when
A. There is scarcity relative to demand
B. There are no buyers for our goods
C. Many people are out of work
D. All raw materials are imported

3. Economic goods are termed scarce goods when they are
A. Not available in sufficient quantities to satisfy effective demand for them
B. Not produced in sufficient quantities to satisfy effective demand for them
C. Of high quality
D. Of primary importance in satisfying the needs of a society.

4. The demand for a good is price inelastic if
A. The price elasticity is one
B. The price elasticity is less than one
C. The price elasticity is greater than one
D. The price elasticity is negative

5.The type of unemployment that occurs when an individual cannot find job as a result of
obsolete skill is
A. Frictional unemployment
B. Structural unemployment
C. Cyclical unemployment
D. Seasonal unemployment

6. An increase in total production (real GDP) causes the demand for money to ______and
interest rate to _________.
A. Increase; increase
B. Increase; decrease
C. Decrease; decrease
D. Decrease; increase

7. The theory of consumption which argues that consumption is based on a household’s
estimate of their income is called the
A. Relative income hypothesis
B. Duesenberry theory
C. Permanent income hypothesis
D. Life-cycle hypothesis

8. The term ‘investment’ in macroeconomics means
A. The total amount of capital goods in the country
B. Total amount of money invested in bonds and stocks
C. Profit
D. The production of goods for immediate consumption.

9. The “velocity” of money is
A. The money supply multiplied by the price level
B. The real money supply divided by the real GDP
C. The ratio of real GDP to the real money supply
D. The money supply divided by the price level.

10. The theory of …………… was propounded by ………………
A. Absolute advantage; David Ricardo
B. Absolute advantage; Adam Smith
C. Comparative advantage; Adam Smith
D. Comparative advantage; Mercantilists

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